Reverse Divergence and Momentum

By Martin J.Pring

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Reverse Divergence and Momentum

An oscillator's failure to confirm the higher high or the lower low of the market is a red flag to most technical traders. Is there a message when the price diverges from the indicator? This veteran technician thinks there is. Technical analysts are constantly comparing prices and indicators to see whether they are moving in gear or if there are discrepancies. An unusual but normally reliable discrepancy occurs when price and momentum switch roles.

Mr. Pring explains that "Since the price is determined by the interaction of many different time cycles, it's important to plot several momentum indicators with differing time spans for any given situation. This is because the relationship between price and momentum reflected in the reverse divergence will probably only be apparent in one or two of the indicators." This informative article is sure to add a notch to your trading belt. ... download the eBook to read more

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